Sunday, February 28, 2010

80% seems like a lot of differentiating based on the experience, but it depends on what companies mean when they make the statement. If “differentiated” means a company’s customer experience is demonstrably better than their competitors, the concurrent improvement of the competitors’ experience ( at least the rest of the 80%) would mean that as all experiences get better, they would remain every bit as undifferentiated as before. The bar on table-stakes service levels would be raised considerably and the customer would win, but the companies would add cost for the same revenue opportunity.

So should this 80% of companies abandon their objective of differentiating on the customer experience?

Not necessarily, and not because a dramatically smaller percentage than 80% will correctly pursue differentiation along the customer experience.

Differentiation doesn’t have to mean a better experience for everyone – it just has to be a better experience for someone. If a company were to select a customer that represents their ideal and change their business model, the service operation, marketing and support processes to attract and serve that customer better than anyone else possibly could, then would be achievable, more difficult to replicate and worthy.

Every market would have a customized set of offerings in every space, and customers would choose the type of experience they prefer, rather than most current markets where choice consists of extremely similar variations of the same service. In air travel, for example, you might have “the singles airline”, “the families airline”, “the business airline”, “the green airline”, “the exclusive airline”, “the low-cost airline”, and so on, with service experiences tailored to the specific travel scenario.

The problem is, most companies are undifferentiated because they serve the “everybody” market. For these companies, the intention to “differentiate on the basis of the customer experience” is meant as revenue growth initiative in their current model, not the selection of a new service and business model that would truly allow to carve out a sustainable, defensible market and serve it better than anyone else. This kind of experience differentiation would require companies to downsize service operations, intentionally cull customers and expend service enablement and marketing dollars in order to attract and better serve their ideal customer.

The service business willing to identify their market in real terms and size to it is also the one with the freedom to change their service model to differentiate on the basis of the customer experience.